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Global Payments Reports First Quarter Earnings
ATLANTA, Sept. 29 /PRNewswire-FirstCall/ -- Global Payments Inc. (NYSE: GPN) today announced results for its first quarter ended August 31, 2006. For the first quarter, revenue grew 16 percent to $260.3 million compared to $224.5 million in the prior year. Excluding the impact of current period stock option expense and prior year restructuring charges, net income grew 41 percent to $44.2 million compared to $31.3 million in the prior year quarter, and diluted earnings per share grew 38 percent to $0.54 compared to $0.39 in the prior year quarter. In accordance with GAAP, prior period net income and diluted earnings per share include certain restructuring charges (see attached reconciliation schedule) relating to an operating center consolidation, which was announced in July 2005. These charges consisted of employee termination benefits. Additionally, the current fiscal quarter includes the recognition of stock option expenses as a result of the company's June 1, 2006 adoption of Statement of Financial Accounting Standards No. 123(R) using the modified prospective method. First quarter fiscal 2007 GAAP net income and diluted earnings per share were $41.5 million and $0.51, respectively, compared to $30.7 million and $0.38, respectively, in the prior year quarter. Comments and Outlook Chairman, President and CEO, Paul R. Garcia, stated, "We are very pleased with our first quarter fiscal 2007 financial results, which were driven primarily by strong revenue and operating margin growth in our merchant services segment. Our domestic ISO channel remains one of the fastest growing areas of the company, with outstanding expansion in the quarter. We are also delighted with the progress made in our new HSBC joint venture and continue to move forward with our sales strategy to take advantage of the strong growth opportunities present in the Asia-Pacific region. We also remain very pleased with our money transfer segment, which achieved solid revenue growth of 18% during the quarter. Based on our overall strong results, we are raising the low end of our annual fiscal 2007 revenue guidance to $1,057 million, and reaffirming the high end of this guidance of $1,084 million. This revenue guidance reflects an expected 16 percent to 19 percent growth versus $908 million in fiscal 2006. In addition, we are raising our annual fiscal 2007 diluted earnings per share guidance to a range of $1.79 to $1.85, excluding the impact of stock option expenses as a result of our adoption of FAS 123R, for an expected growth of 16 percent to 20 percent versus $1.54 in fiscal 2006." (1) Including the impact of these stock option expenses, our annual fiscal 2007 diluted earnings per share guidance is $1.69 to $1.75. Conference Call Global Payments will hold a conference call today, September 29, 2006 at 10:30 a.m. ET to discuss financial results and business highlights. The conference call may be accessed by calling 1-888-791-2132 (U.S.) or 1-517-623-4000 (internationally) and using a pass code of "GPN" for both numbers, or via Web cast at http://www.globalpaymentsinc.com/. A replay of the call will be available on the Global Payments Web site through October 13, 2006. Global Payments Inc. (NYSE: GPN) is a leading provider of electronic transaction processing services for consumers, merchants, Independent Sales Organizations (ISOs), financial institutions, government agencies and multi- national corporations located throughout the United States, Canada, Latin America, Europe and the Asia-Pacific. Global Payments offers a comprehensive line of processing solutions for credit and debit cards, business-to-business purchasing cards, gift cards, electronic check conversion and check guarantee, verification and recovery including electronic check services, as well as terminal management. The company also provides consumer money transfer services from the U.S. and Europe to destinations in Latin America, Morocco and the Philippines. For more information about the company and its services, visit http://www.globalpaymentsinc.com/. (1) Fiscal 2006 diluted earnings per share was $1.53 on a GAAP basis, which includes restructuring charges equivalent to $0.01 in diluted earnings per share. This announcement and comments made by Global Payments' management during the conference call may contain forward-looking statements pursuant to the "safe-harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward looking statements involve risks and uncertainties such as product demand, market and customer acceptance, the effect of economic conditions, competition, pricing, development difficulties, foreign currency risks, costs of capital, continued certification by credit card associations, the ability to consummate and integrate acquisitions, and other risks detailed in the company's SEC filings, including the most recently filed Form 10-Q or Form 10-K, as applicable. The company undertakes no obligation to revise any of these statements to reflect future circumstances or the occurrence of unanticipated events. Contact: Jane M. Elliott
770-829-8234 Voice
770-829-8267 Fax
investor.relations@globalpay.com
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)
Three Months Ended August 31,
2006 2005
Revenues $260,308 $224,456
Operating expenses:
Cost of service 98,190 93,183
Sales, general and administrative 98,591 79,876
Restructuring - 873
196,781 173,932
Operating income 63,527 50,524
Other income (expense):
Interest and other income 3,596 914
Interest and other expense (2,162) (1,520)
1,434 (606)
Income before income taxes and
minority interest 64,961 49,918
Provision for income taxes (20,909) (17,022)
Minority interest, net of tax (2,543) (2,158)
Net income $41,509 $30,738
Earnings per share:
Basic $0.52 $0.39 (1)
Diluted $0.51 $0.38 (1)
Weighted average shares outstanding:
Basic 79,734 78,024 (1)
Diluted 81,576 81,014 (1)
(1) All share and per share amounts reflect the retroactive effect of the
company's two-for-one stock split, which was completed through a
stock dividend that was distributed on October 28, 2005.
CONSOLIDATED CONDENSED BALANCE SHEETS
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)
August 31, May 31,
2006 2006
(Unaudited)
Assets
Cash and cash equivalents $168,578 $218,475
Accounts receivable, net 76,157 67,476
Claims receivable, net 1,592 903
Settlement processing assets 37,979 39,671
Other current assets 28,524 21,881
Current assets 312,830 348,406
Property and equipment, net 109,396 107,977
Goodwill 434,198 387,280
Other intangible assets, net 182,234 167,182
Other assets 12,362 7,833
Total assets $1,051,020 $1,018,678
Liabilities and Shareholders' Equity
Lines of credit $49 $-
Settlement processing obligations 29,406 37,942
Payable to money transfer
beneficiaries 5,828 6,361
Accounts payable and other accrued
liabilities 96,649 104,606
Obligations under capital leases-
current portion 397 746
Current liabilities 132,329 149,655
Other long-term liabilities 82,481 85,804
Total liabilities 214,810 235,459
Minority interest in equity of subsidiaries 15,320 12,996
Shareholders' equity 820,890 770,223
Total liabilities and
shareholders' equity $1,051,020 $1,018,678
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)
Three Months Ended August 31,
2006 2005
Cash flows from operating activities:
Net income $41,509 $30,738
Non-cash items
Depreciation and amortization 9,805 10,396
Minority interest in earnings 2,651 2,158
Other, net 9,554 8,368
Changes in working capital, which
(used) provided cash
Settlement processing (7,572) 14,597
Other, net (33,587) (12,198)
Net cash provided by
operating activities 22,360 54,059
Cash flows from investing activities:
Capital expenditures (6,929) (5,206)
Business acquisitions, net of cash
acquired (67,195) (480)
Net cash used in investing
activities (74,124) (5,686)
Cash flows from financing activities:
Net borrowings (payments) on line of credit 49 (57,673)
Principal payments under capital
leases and other notes (349) (1,012)
Net stock issued to employees
under stock plans and dividends 5,585 (1,016)
Distributions to minority interests (2,530) (2,818)
Net cash provided by (used
in) financing activities 2,755 (62,519)
Effect of exchange rate changes on cash (888) 621
Decrease in cash and cash equivalents (49,897) (13,525)
Cash and cash equivalents, beginning
of period 218,475 48,979
Cash and cash equivalents, end of period $168,578 $35,454
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
Reconciliation to Exclude Restructuring and Stock Option Expenses from
Normalized Results
(In thousands, except per share data)
Three Months Ended August 31,
2006 2005
Stock Restruct-
Normalized Options(1) GAAP Normalized uring(2) GAAP
Revenue $260,308 $- $260,308 $224,456 $- $224,456
Operating expenses:
Cost of service 98,190 - 98,190 93,183 - 93,183
Sales, general and
administrative 94,588 4,003 98,591 79,876 - 79,876
Restructuring - - - - 873 873
192,778 4,003 196,781 173,059 873 173,932
Operating income 67,530 (4,003) 63,527 51,397 (873) 50,524
Other income/(expense)
Interest and
other income 3,596 - 3,596 914 - 914
Interest and
other expense (2,162) - (2,162) (1,520) - (1,520)
1,434 - 1,434 (606) - (606)
Income before
income taxes 68,964 (4,003) 64,961 50,791 (873) 49,918
Provision for
income taxes (22,198) 1,289 (20,909) (17,320) 298 (17,022)
Minority interest,
net of tax (2,543) - (2,543) (2,158) - (2,158)
Net income $44,223 $(2,714) $41,509 $31,313 $(575) $30,738
Basic shares 79,734 - 79,734 78,024 - 78,024
Basic earnings
per share $0.55 $(0.03) $0.52 $0.40 $(0.01) $0.39
Diluted shares 81,576 - 81,576 81,014 - 81,014
Diluted earnings
per share $0.54 $(0.03) $0.51 $0.39 $(0.01) $0.38
(1) Relates to the company's adoption of SFAS 123(R) on June 1, 2006,
which requires the recognition of compensation expense resulting from
employee stock options. Also reflects the related income tax benefit
using the company's effective tax rate, which is defined as the
provision for income taxes divided by income before income taxes and
minority interest.
(2) Restructuring amount consists of employee termination benefits
relating to an operating center consolidation. Also reflects the
related income tax benefit using the company's effective tax rate, as
described above.
SEGMENT INFORMATION
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)
Three Months Ended August 31,
2006 2005
Revenues
Domestic direct $135,442 $115,265
Canada 60,918 54,278
Central and Eastern Europe 13,275 12,727
Asia-Pacific 5,486 -
Domestic indirect and other(1) 12,195 14,168
Merchant services(1) 227,316 196,438
Domestic 29,302 25,701
Europe 3,690 2,317
Money transfer(1) 32,992 28,018
Total revenues $260,308 $224,456
Operating income
Merchant services $72,961 $56,248
Money transfer 4,679 4,579
Corporate(2) (14,113) (9,430)
Restructuring - (873)
Operating income $63,527 $50,524
(1) Prior to fiscal 2006, the company's legacy funds transfer revenue
was historically reported in "Money transfer". Beginning in the
fourth quarter of fiscal 2006, such revenues were reclassified to
"Merchant services" under the "Domestic indirect and other"
category. All prior period amounts were reclassified for this
change. With this change, the company's "Money transfer" segment
only includes its consumer money transfer service offerings.
(2) Fiscal 2007 includes compensation expense resulting from employee
stock options as a result of our adoption of FAS 123R. Fiscal 2006
does not include these expenses.
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